Budget is an estimate of expected income and expense for a given period in the future. So, budget planning means to plan your finances. You must have a plan on how you will become rich. You have to keep records of how you spend and receive money. You might have to make adjustments and pay your self first.
What is personal financial planning? Personal financial planning means spending, saving, and investing your money so you can have the kind of life you want as well as financial security. The financial planning process has six steps:
Determin Your Current Financial Situation
Make a list of your savings, monthly income (job earnings, gifts, etc.), monthly expense (spendings), and debts
Develop Your Financial Goals
Values, beliefs and principles you consider important, correct, and desirable can affect your goals
Distinguish between your needs and wants
Short-term (1 yr. or less), Intermediate (2-5 yrs.), Long-term (5 yrs. or more)
Must be realistic, specific, and set within a defined time frame
Identify Alternative Courses of Action
Other options of improving or extending your current situation
Evaluate Your Alternatives
Keep track of social and economic conditions
Opportunity cost (trade-off), what you give up when you make one choice instead of another, involves you to know what you gain
Create & Use Your Financial Plan of Action
List of ways to achieve your financial goals
Review & Revise Your Plan
Reevaluate and revise it every year, and as needed
Money management, planning how to get the most from your money, can help you keep track of where your money goes so that you can make it go farther.
Oraganize your personal financial documents (documents that tell how much money you have, bank statement, receipt)
Keep financial documents in home files (file drawer, cardboard box), safe-deposit box (small compartment that you can rent in a bank), or on a home computer
What are you worth now? Persoanl financial statements, documents taht provide information about your current financial postition and present summary of your income and spendings, can help you determing what you own and what you owe. To know what you are worth a balance sheet, a financial statement that lists the items of value you own, the debt you owe, and your net worth (Own - Debt), should be created. To create a balance sheet, follow the steps:
Determine Your Assets
Assets are items of value that you own (cash, property, investments)
Determine Your Liabilities
Liabilities are the debts you owe
Calculate Your Net Worth
Assets - Liabilites = Net Worth
If your liabilities are greater than you assets then you may experience insolvency
Evaluate Your Financial Situation
Is your net worth increasing? Update balance sheet or make a new one every few months
A balance sheet shows you what you are worth, but it will nowt show your monthly cash flow, the money that actually goes into and out of your wallet and bank accounts. Cash flow is divided into two parts: inflow and outflow. To create a cash flow statement:
Record Your Income (Inflow)
Income is the money you receive (paychecks, gifts, allowances)
Record Your Expense (Outflow)
Expense is the money you spend
Fixed expenses are those spendings that more or less remain the same each month (rent, cable, etc.)
Variable expenses are those spendings that may change from month to month (recreation, clothing, etc.)
Determine Your Net Cash Flow
Income - Expense = Net Cash Flow
Postitive flow is surplus, more income than expenditure
Negative flow is deficit, more expneses than income
To acheive your financial goals "budget". Using a budget will help you to learn how to live within your income and how to spend your money wisely. You will also develop good money management skilles. Budget has seven steps:
Set Your Financial Goals
Estimate Your Income
Budget for Unexpected Expenses & Savings
Example: Emergency funds, College savings
Budget for Fixed Expenses
Budget for Variable Expenses
Record What You Spend
Review Spending & Saving Patterns
Review and change budget each month as needed
Review progress
Preparing a budget and keeping track of every expense will not solve your financial problems. A good budget sould have certain characteristics.
Budget is an estimate of expected income and expense for a given period in the future. So, budget planning means to plan your finances. You must have a plan on how you will become rich. You have to keep records of how you spend and receive money. You might have to make adjustments and pay your self first.
What is personal financial planning? Personal financial planning means spending, saving, and investing your money so you can have the kind of life you want as well as financial security. The financial planning process has six steps:
Money management, planning how to get the most from your money, can help you keep track of where your money goes so that you can make it go farther.
What are you worth now? Persoanl financial statements, documents taht provide information about your current financial postition and present summary of your income and spendings, can help you determing what you own and what you owe. To know what you are worth a balance sheet, a financial statement that lists the items of value you own, the debt you owe, and your net worth (Own - Debt), should be created. To create a balance sheet, follow the steps:
A balance sheet shows you what you are worth, but it will nowt show your monthly cash flow, the money that actually goes into and out of your wallet and bank accounts. Cash flow is divided into two parts: inflow and outflow. To create a cash flow statement:
To acheive your financial goals "budget". Using a budget will help you to learn how to live within your inc
Preparing a budget and keeping track of every expense will not solve your financial problems. A good budget sould have certain characteristics.